Page |1
WALL STREET PREP ACCOUNTING CRASH COURSE EXAM
(VERSION 1 & 2) INCLUDES ACCURATE AND VERIFIED
QUESTIONS COVERING CORE ACCOUNTING PRINCIPLES
SUCH AS THE ACCOUNTING EQUATION, FINANCIAL
STATEMENTS (INCOME STATEMENT, BALANCE SHEET,
CASH FLOW), JOURNAL ENTRIES EXAM 2025/2026 NEWEST
ACTUAL EXAM WITH COMPLETE QUESTIONS AND
VERIFIED ANSWERS |ALREADY GRADED A+|
Imagine two identical companies, with only one difference -
Company A reports using LIFO, while Company B reports using
FIFO. Assume that prices of inventories steadily rise over time.
Which of the following is correct? - ANSWER-Company A will
report lower net income than company B.
Amazonia, an online retailer, lost $50 million in inventory due to a
fire. Which of the following journal entries will likely occur as a
result? - ANSWER-$50 million credit to inventory and $50 million
debit to retained earnings
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On January 1, 2020, a company purchases equipment with a
useful life of 5 years for $50 million. The company uses straight-
line depreciation and has assumed no residual value for the
company. On January 1, 2023, the company sells the equipment
for $45 million.
Which of the following is correct? - ANSWER-When the company
sells the equipment, it will recognize a $25 million gain on sale on
the income statement.
Deferred (unearned) Revenue - ANSWER-revenue received for
services not yet provided by the company
-current liability if the revenue is expected to be recognized within
the year, otherwise it is a long-term liability
Leases - ANSWER-lease payments are define contractually
upfront between the lessee (company making lease payments)
and lessor (company collecting lease payments)
-under IFRS, all leases with a few exceptions are accounted for
as finance leases
-under US GAAP, leases can be accounts for as operating leases
or finance leases
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Finance Lease vs Operating Lease - ANSWER-under US GAAP,
a lease is a finance lease if any of these criteria are met
-does ownership of the asset transfer to the lessee by end of
lease term?
-lessor grants lessee an option to purchase the assets that the
lessee is reasonably certain to exercise
-lease term is for major part of asset's remaining economic life
-PV of lease payments is substantially all the asset's fair value
-asset is so specialized that it is expected to have no alternative
use to lessor
Finance Leases - ANSWER-recognizes the lease as debt and the
underlying asset as PP&E on the lessee's balance sheet
-lease as debt: interest fees are implied and baked into the total
lease expense
-lease liability decreases with interest expenses, not depreciation
Operating Leases - ANSWER--balance sheet impact: initially
recognized as a liability and PP&E
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-income statement impact: reduced by rent ("lease") expense
-straight-line lease: if lease payments grow each year, the I/S will
recognize an annual straight line expense; creates a disconnect
between the cash outlay and accrual based expense recognized
Other Comprehensive Income - ANSWER-equity line item that
captures the accumulation of income or loss that a company has
recognized over time that is not recognized directly on the I/S
-includes gains and losses from foreign currency translations,
unrealized gains and losses on available for sale securities, etc.
Stock Based Compensation - ANSWER-increases common stock
& APIC but decreases retained earnings; no cash impact
During 2014, Boston Company's assets increased $95,500 and
the liabilities decreased $17,300. Boston Company's
stockholders' equity at December 31, 2014 was $211,500. What
amount was stockholders' equity at January 1, 2014? - ANSWER-
$98,700
WALL STREET PREP ACCOUNTING CRASH COURSE EXAM
(VERSION 1 & 2) INCLUDES ACCURATE AND VERIFIED
QUESTIONS COVERING CORE ACCOUNTING PRINCIPLES
SUCH AS THE ACCOUNTING EQUATION, FINANCIAL
STATEMENTS (INCOME STATEMENT, BALANCE SHEET,
CASH FLOW), JOURNAL ENTRIES EXAM 2025/2026 NEWEST
ACTUAL EXAM WITH COMPLETE QUESTIONS AND
VERIFIED ANSWERS |ALREADY GRADED A+|
Imagine two identical companies, with only one difference -
Company A reports using LIFO, while Company B reports using
FIFO. Assume that prices of inventories steadily rise over time.
Which of the following is correct? - ANSWER-Company A will
report lower net income than company B.
Amazonia, an online retailer, lost $50 million in inventory due to a
fire. Which of the following journal entries will likely occur as a
result? - ANSWER-$50 million credit to inventory and $50 million
debit to retained earnings
, Page |2
On January 1, 2020, a company purchases equipment with a
useful life of 5 years for $50 million. The company uses straight-
line depreciation and has assumed no residual value for the
company. On January 1, 2023, the company sells the equipment
for $45 million.
Which of the following is correct? - ANSWER-When the company
sells the equipment, it will recognize a $25 million gain on sale on
the income statement.
Deferred (unearned) Revenue - ANSWER-revenue received for
services not yet provided by the company
-current liability if the revenue is expected to be recognized within
the year, otherwise it is a long-term liability
Leases - ANSWER-lease payments are define contractually
upfront between the lessee (company making lease payments)
and lessor (company collecting lease payments)
-under IFRS, all leases with a few exceptions are accounted for
as finance leases
-under US GAAP, leases can be accounts for as operating leases
or finance leases
, Page |3
Finance Lease vs Operating Lease - ANSWER-under US GAAP,
a lease is a finance lease if any of these criteria are met
-does ownership of the asset transfer to the lessee by end of
lease term?
-lessor grants lessee an option to purchase the assets that the
lessee is reasonably certain to exercise
-lease term is for major part of asset's remaining economic life
-PV of lease payments is substantially all the asset's fair value
-asset is so specialized that it is expected to have no alternative
use to lessor
Finance Leases - ANSWER-recognizes the lease as debt and the
underlying asset as PP&E on the lessee's balance sheet
-lease as debt: interest fees are implied and baked into the total
lease expense
-lease liability decreases with interest expenses, not depreciation
Operating Leases - ANSWER--balance sheet impact: initially
recognized as a liability and PP&E
, Page |4
-income statement impact: reduced by rent ("lease") expense
-straight-line lease: if lease payments grow each year, the I/S will
recognize an annual straight line expense; creates a disconnect
between the cash outlay and accrual based expense recognized
Other Comprehensive Income - ANSWER-equity line item that
captures the accumulation of income or loss that a company has
recognized over time that is not recognized directly on the I/S
-includes gains and losses from foreign currency translations,
unrealized gains and losses on available for sale securities, etc.
Stock Based Compensation - ANSWER-increases common stock
& APIC but decreases retained earnings; no cash impact
During 2014, Boston Company's assets increased $95,500 and
the liabilities decreased $17,300. Boston Company's
stockholders' equity at December 31, 2014 was $211,500. What
amount was stockholders' equity at January 1, 2014? - ANSWER-
$98,700
